Coronavirus: FirstGroup and Stagecoach slash services and freeze recruitment to cope with revenue downturn

Stagecoach and FirstGroup have dropped financial guidance and implemented drastic cost-saving measures as demand for public transport plunges.

FirstGroup warned that its North American arm, which operates student services, has been rocked by school closures

The two travel giants are attempting to mitigate a downturn in revenue during the coronavirus outbreak, which has seen demand plummet on the back of government advice to work from home and avoid all non-essential contact with others.

In updates to the market the FTSE 250-listed businesses said they have reduced transport services, introduced a freeze on new recruitment and moved to cut salaries.

This includes Perth-based Stagecoach cutting director pay by 50 per cent and scrapping its dividend to help offset the impact of the virus after passenger numbers dropped by as much as half.

Stagecoach has moved to slash director's pay after demand for services has roughly halved

Aberdeen-headquartered FirstGroup, Scotland’s biggest bus operator, pointed to “unprecedented changes” in the market for all of its businesses, including its First Student arm, which has been knocked by school closures. Around half of its revenues come from operating student services in the US and Canada.

FirstGroup said it is in touch with school boards in North America and governments in the UK, US and Canada to agree payment terms adapted to meet future service levels.

As of the end of last month, the group has around £400 million in committed undrawn facilities and free cash, with access to additional financing including a £250m bank bridge facility signed last week.

Chief executive Matthew Gregory said: “Continuity of transport is essential to governments, local services and many of our customers throughout this time, and they will also be critical to a restoration of normal life when the present uncertain and extremely difficult situation is overcome.

“The long-term fundamentals of our businesses are sound, we have taken immediate action and will continue to do all that is necessary to ensure the group emerges from this exceptional situation in the most robust position possible.”

Bus operator Stagecoach has trimmed it services by around 60 per cent and is now operating a Sunday hours-style timetable.

However, the group moved to reassure shareholders by stating that it expects to “maintain a significant portion of revenue during the downturn”. It is currently in discussions with Transport for London about potential contract changes and is still due payments from its expired rail franchises.

Stagecoach said it has more than £290m of available cash and undrawn, committed bank facilities to “underpin the continuity of the business”.

The business has also entered into £325m of new, bi-lateral banking facilities, committed through to March 2025.

Chief executive Martin Griffiths said: “We are all facing an unprecedented challenge at this time and the impact is being felt by our business and employees.”

Stagecoach will not propose further dividends for its financial year to 2 May and is due to report preliminary full-year results on 24 June.

Fellow transport group Go-Ahead has also dropped guidance for the remainder of the year.

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